Panama City Sales Tax: Rates, Exemptions, and Use Tax

Panama City sales tax is 7%: Florida’s 6% state rate plus a 1% Bay County discretionary surtax.¹ That combined rate covers most retail goods and a handful of services, with important carve-outs for groceries, prescriptions, and now hurricane supplies.

How the 7% Breaks Down

The 6% is Florida’s statewide sales tax, applied to every taxable transaction in the state. The 1% county portion is actually two separate half-percent levies with different sunset dates: one runs through December 31, 2030, and the other through December 31, 2036.²

Big-ticket purchases get a break on the county portion. The 1% surtax applies only to the first $5,000 of any single item’s price, while the 6% state rate applies to the full amount. Buy a $30,000 boat and you’ll pay 6% on the whole $30,000 but just 1% on the first $5,000, saving $250 in local tax.³ Items normally sold together or assembled into a working unit count as a single item, so splitting the pieces at checkout doesn’t multiply the cap.

What’s Taxable

Nearly all tangible goods sold at retail carry the full 7%: electronics, furniture, clothing, building materials, and the like. Florida also taxes a few services other states leave alone. Nonresidential cleaning (janitorial work for offices or warehouses) is taxable at the combined rate,⁴ and commercial pest control is treated the same way.

Short-Term Rentals Hit 12%

If you’re booking (or hosting) a vacation stay in Panama City, the rate is not 7%. Hotels, Airbnbs, VRBOs, and other rentals of six months or less carry 6% state sales tax, the 1% county surtax, and Bay County’s 5% tourist development tax, for a combined 12% on every nightly rate.⁵ The tourist development tax applies within Bay County ZIP codes 32401, 32404, 32405, 32407, 32408, 32410, and the Bay County portion of 32413, which covers Panama City proper.

Commercial Rent Is No Longer Taxed

Florida eliminated sales tax on commercial real property rentals effective October 1, 2025. No state sales tax or county surtax applies to lease payments for rental periods beginning on or after that date.⁶ This is a significant change for Panama City businesses that lease office, retail, or warehouse space.

What’s Exempt

Groceries intended for home consumption are not taxed. Bread, milk, eggs, produce, canned goods, and similar food products fall outside the sales tax.⁷ Prepared food for immediate consumption, including restaurant meals, is taxable, so the dividing line is whether the food is meant to be taken home and prepared.

Prescription medications, medical devices dispensed by prescription, and related diagnostic supplies are also exempt. That covers prescription drugs, eyeglasses, single-use medical supplies, and prosthetic appliances ordered by a licensed practitioner.⁸

Hurricane and Safety Supplies, Now Permanent

Florida used to run temporary tax holidays for disaster preparedness. Starting August 1, 2025, many of those exemptions became permanent, so Panama City residents can buy the following year-round without tax:

Batteries in AA, AAA, C, D, 6-volt, and 9-volt sizes
Portable generators producing 10,000 running watts or less
Fire extinguishers
Smoke and carbon monoxide detectors
Portable gas cans of 5 gallons or less
Coast Guard–approved life jackets
Waterproof tarps of 1,000 square feet or less
EPA-registered insect repellent for skin application
Sunscreen, bicycle helmets, and ground anchor or tie-down kits

No special shopping window required.⁹

Use Tax on Things You Buy Out of State

When you buy something online or from an out-of-state seller who doesn’t charge Florida sales tax, you owe use tax at the same combined 7% once the item is delivered to your Panama City address. That applies to furniture ordered from an out-of-state catalog, equipment picked up at a trade show elsewhere, and goods from a seller who simply didn’t collect.¹⁰

Individual consumers report use tax quarterly on Form DR-15MO, the Out-of-State Purchase Return. It’s due the first day of the month following the quarter and becomes late after the 20th. You can also file and pay online. No return is required if the tax owed comes in under a dollar.¹⁰ Registered businesses report use tax on their regular DR-15 return, entering untaxed out-of-state and internet purchases on a separate line.¹¹

Registering a Business to Collect

Before your first taxable sale in Panama City, you need a Certificate of Registration from the Florida Department of Revenue. Apply with Form DR-1, the Florida Business Tax Application, either online or on paper.¹² You’ll need your FEIN, the business’s legal name, a physical street address (no P.O. boxes), and the date of your first taxable activity in Florida, which the Department uses to set your initial filing period.¹³

Registration also brings an Annual Resale Certificate, which lets you buy inventory for resale without paying tax at purchase. Certificates for the following calendar year become available each November and expire December 31.¹⁴ It only covers items you genuinely intend to resell. Office furniture, your business computer, and shop cleaning supplies don’t qualify, and if you buy something tax-free with the certificate and then use it yourself, you owe use tax and must report it on your next return.

Filing Returns

Registered dealers file Form DR-15, the Sales and Use Tax Return. Returns are due the 1st of the month following each reporting period and become late after the 20th. If the 20th falls on a weekend or state holiday, the deadline shifts to the next business day.¹⁵

Filing frequency depends on volume. Businesses collecting more than $1,000 per year file monthly. Those collecting $501 to $1,000 file quarterly, and smaller operations collecting $500 or less may file semiannually or annually. File a return for every reporting period even if you collected zero, because skipping triggers penalties.¹¹

Businesses that paid $5,000 or more in sales and use tax during the prior state fiscal year must file and pay electronically. Electronic filers also earn a small collection allowance, a credit that lets you keep a portion of the tax collected to offset compliance costs. Keep the confirmation number from each electronic submission as proof of timely filing.

Late Filing and Payment Penalties

Miss the deadline and you face a 10% late filing penalty on the tax owed, with a $50 minimum that applies even if you owe nothing. Businesses required to file electronically but that submit paper returns pay an extra $10 for the wrong filing method and another $10 for paying the wrong way. A floating interest rate also runs on any underpayment from the original due date until the balance is cleared.¹⁵ Keep records supporting every reported transaction for at least three years from the date you file or the date the return was due, whichever is later.¹¹

1
Florida Department of Revenue. Tax and Interest Rates
2
Florida Department of Revenue. Discretionary Sales Surtax Information for Calendar Year 2026
3
Florida Senate. Florida Statutes 212.054 – Discretionary Sales Surtax; Limitations, Administration, and Collection
4
Florida Department of Revenue. Sales and Use Tax on Cleaning Services
5
Florida Department of Revenue. Local Option Transient Rental Tax Rates
6
Florida Department of Revenue. Tax Information Publication 25A01-04 – Sales Tax on Commercial Rentals Repealed Effective October 1, 2025
7
Florida Senate. Florida Statutes 212.08 – Sales, Rental, Use, Consumption, Distribution, and Storage Tax; Specified Exemptions
8
Florida Department of Revenue. Nontaxable Medical Items and General Grocery List
9
Florida Department of Revenue. Tax Information Publication 25A01-05 – New Sales Tax Exemptions Beginning August 1, 2025
10
Florida Department of Revenue. Consumer Information
11
Florida Department of Revenue. Sales and Use Tax Returns Instructions for DR-15
12
Florida Department of Revenue. Account Management and Registration
13
Florida Department of Revenue. Florida Business Tax Application
14
Florida Department of Revenue. Annual Resale Certificate for Sales Tax
15
Florida Department of Revenue. Florida Sales and Use Tax